KBC Ireland to get further bailout from Belgian parent

KBC BANK IRELAND will receive further capital from its Belgian parent this year as loan losses will fall but remain high, chief executive John Reynolds has said.

The Irish bank received €75 million from KBC Bank in the first quarter of this year as arrears rose on the Irish residential mortgage portfolio of €13 billion. This was the first cash injection by the Irish bank’s parent since 2008. KBC converted almost €300 million of subordinated debt loaned to the Irish unit into capital earlier this year.

Mr Reynolds said it was “regrettable” that the bank had to take a bailout from its parent but that it had avoided capital support for the first four years of the crisis. “We expect 2012 to be another difficult year but not as bad as 2011, and there will be a need for further capital as we incur credit costs. We are not entirely sure how much will be required,” he said.

The bank took a further bad debt charge of €195 million for bad loans in the first quarter. This was down from €228 million in the previous quarter but Mr Reynolds said it was “still not acceptable”.

The Irish bank accounted for 75 per cent of the parent’s €261 million first-quarter charge, despite representing 12 per cent of overall group loans at the Belgian bank.

Total non-performing loans in KBC’s €17 billion Irish loans rose to 20.5 per cent from 17.7 per cent at the end of 2011, while arrears of more than 90 days increased to 14.8 per cent from 12.6 per cent.

Mr Reynolds said the rate of new arrears has fallen since January and he expected the mortgage book to improve in 2013.

Further house price falls mean KBC expects loan losses to be at the higher end of the €500 million-€600 million range, chief financial officer Luc Popelier said.

Mr Reynolds, who is president of the Irish Banking Federation, said it had asked the Government to reduce the amount of mortgage debt eligible for write-off under the proposed personal insolvency rules from €3 million to €1 million.

KBC made better-than-forecast profits for the first quarter, with net profit of €380 million against a net profit of €437 million in the previous quarter and €821 million in the same quarter in 2011.

The impairment charge of €261 million compared with €97 million for the same period a year ago, but it was down from €599 million in the previous quarter.